IRD Procurement:

BASIC

October 2011

2

NOTE:

The following provides guidance on IRD’s Procurement process.

This is not a policy document.

3

What is Procurement?When we use the word procurement, we mean:

• The act of buying goods and services

• This can be on behalf of our donors to fulfill project requirements or,

• This can be purchases of goods or services to meet IRD’s internal needs.

Procurement refers to the entire process from identifying a need and submitting a requisition to receipt and approval for final invoice and payment.

4

What is Procurement?• Goal: to obtain quality products and services at the best price

• Good procurement requires:

- planning- budgeting - sourcing- receipt of goods or services - payment

• It may be the job of the procurement manager/ officer, but it requires the combined efforts of management, finance, admin and program to get it right!

5

Objectives of this training: Help you understand basic principles of procurement

Outline the correct procedures

Achieve best value for IRD and our donors

Highlight effective internal controls

Emphasize objective, transparent, fair and consistent selection process

6

The Procurement Process

7

Procurement Process: Step 1 Identify need and/or requirement

Sources include funding agreement, client requests, office needs

Define how or what will meet the need and/or requirement (specifications)

• Avoid over-specifying:it will only increase the cost and restrict the competition.

• Or; under-specifying:it may compromise the quality level and you may not receive the product or service adequate to fulfill your needs

8

Procurement Process: Step 2 Prepare procurement requisition form (PRF)

• All procurements of services or goods must start with a signed Requisition Form.

• A PRF is a request to PROCURE not to PAY for goods or services• Provide specifications and other relevant information• Indicate which project and line item we are

procuring for• Give an estimated price for the request• State when goods/services are needed by

and where

9

Procurement Requisition Form (PRF) Requirements:

• Allowable: within the scope of the project (source and origin; ineligible goods)

• Allocable: direct vs indirect

• Right quantity: how much

• Right quality: specifications, quality, education etc.

• Right time: date or schedule

• Right place: location

• Auditable and transparent: clear paper trail

10

Serial No: DBE3/ 001

Location: Semerang Office

per unit Total Project Class Account Code Description

1FOLDERS FOR TRAINING WORKSHOP (as attached specification) unit 10 1.00 10.00

2LIQUID NITROGEN m3 10 1.50 15.00

3ALUMINIUM SHEETING m2 10 1.25 12.50

4NAILS kilo 1 5.00 5.00

42.50

Orders Date

Requester: Freddie Jones 1. Urgent:

Authorization: Manager 2. Routine: October 29th

Finance: Finance

Original - Finance Department; Copy - Requesting Department; Copy - Procurement & Logistic Department

Estimated Cost in US$

Item / Service and Description/ Specification Unit Qy

INTERNATIONAL RELIEF & DEVELOPMENT

Remarks / reference: Where to be charged? Where to be delivered? Further instructions

TOTAL

No.

PROCUREMENT REQUISITION

Financial Coding (to be filled in by Finance Department)

Priority (Indicate Date)SignatureName, Position

Allocability

Right Quality

Right Quantity

Within budget

Right time

Clearly identify where the goods and services are to be delivered”

Attachments must be included

11

Procurement Process: Step 3

Submit PRF to authorized personnel for approval

• The form must be signed and must certify that:1. funds are available 2. within budget

• This form ensures a segregation of duties by requiring multiple layers of approval!

12

Procurement Process: Step 4Develop procurement strategy

Where will you find what you are in need of?– Identify the relevant market and sources

(This will determine where you publicize the procurement – Step 5)

What are your competition requirements?– IRD has policies and procedures that outline competition

requirements for specific dollar amounts– Our donors may also have competition requirements

13

Procurement Process: Step 4 Develop procurement strategy

What type of agreement or contract will be needed? Identify your key selection criteria.

What will your final decision be based on? Examples include:

Price Technical approach

Qualifications of staff Past performance

Quality Timeliness

Management Other

14

Procurement Process: Step 4 Develop procurement strategy

Determine who will make the selection.

Selection committees with representation from different functional areas promote fairness and transparency.

Prepare a solicitation which lists the requirements, selection criteria, rules of submission, and other relevant information companies need to know in order to submit their bid or proposal

Solicitations may also be called Request for Quotes (RFQ), Requests for Proposals (RFP), or Invitations for Bids (IFB)

15

Procurement Process: Step 5Request bids or proposals

This step is determined by the procurement strategy and competition requirements identified in step 4!You may do this by:

or a combination of the above

Telephone Internet

Newspaper ads Posting on bulletin boards

Word of mouth

16

Procurement Process: Step 6

Evaluate responses

In this step, score the responses in accordance with the key criteria identified in step 5 and rank them

17

Procurement Process: Step 7

Make selection

Based on the rankings identified in Step 6, make and document the selection

18

Procurement Process: Step 8

Execute AgreementThe type of agreement is identified in step 4

Consult with your Contracts and Grants specialist before drafting the contract/ agreement between IRD and the provider of the goods/services needed.

Obtain signature from an IRD staff member authorized to sign contracts!

19

Procurement Process: Step 9

Obtain goods or services

Document your receipt with a goods receipt report !!!

:

:

:

:

:

No. DESCRIPTION UNIT CONDITION SERIAL NUMBER

1 LCD ACER XD1150 1 Good S/N: EYJ39010057010016859102 LAPTOP IMB R51e 1 Good S/N: LV-ADY73 06/05

: YES □ NO □

Remarks for NO :

Acknowledge by:

Name: Name: Name:Date: Date: Date:

Copy 1 : Procurement & Logistic DepartmentCopy 2 : Finance DepartmentCopy 3 : Vendor

Date received

No. Invoice / Waybill

Location

No. Purchase Order (PO)/ Purchase Requistion (PR)

GOODS RECEIPT REPORT

INTERNATIONAL RELIEF & DEVELOPMENT

Date of PO/ PR

Received by:Sent by:

Quantity & item description received described in PO

20

Procurement Process: Step 10Receive invoice and make paymentNO requests for payment will be made without the following:

Purchase Requisition Form (PRF) Invoice or Receipt Goods Receipt Form

- Anything that deviates from the original documented requirement, yet still accepted, must be explained.- The receipt form should make reference to the PRF/PO number. - For services: time sheets, photocopies of deliverables, proof of inspection, are acceptable proof of work done

21

Competition Requirements• IRD’s procurement policy sets forth mandatory competition

requirements for particular dollar amounts.

• Procurement files must contain minimally required information on competition for all procurements of $500 or more.

• Additional procurement documentation is required for procurements of $3,000 or more

• If you cannot show that you adhered to required procedures the donor may disallow the cost and you may face disciplinary actions.

22

BEWAREImproper business practices, including fraud and corruption are frequently associated with procurements. Accordingly, donors, auditors, and investigators look for indicators of “tainted” procurements or fraudulent activities.

IRD staff must maintain the integrity of the procurement process!

What follows are some prohibited practices that are frequently identified by auditors and investigators. Other prohibited practices are set forth in IRD’s Code of Business Ethics and Conduct.

23

Splitting Bids

• Breaking up required services or products into smaller sizes to avoid the requirements for larger dollar value contracts is called splitting bids

24

Restrictive Specifications

• Writing specifications to meet the qualifications of one particular company, supplier, or product.

• NOTE - Staff may not have intentionally drafted restrictive specs to favor a particular company or product, but nevertheless, the procurement may have restrictive specs.

25

Conflicts of Interest• Upholding the integrity of the procurement process ensures that

transactions are fair, transparent and made at an arms-length distance

• A conflict of interest exists when there is an actual or perceived bias toward a person or business which may create, or appear to create, an unfair advantage.

• Showing any type of favoritism, or the appearance of favoring one person or business over another creates a conflict of interest situation.

Always ask yourself, “How will my decision look to an outsider?”

• Actual, potential, or apparent conflicts of interest MUST be disclosed to IRD’s Chief of Compliance.

26

Buy-Ins• Modifications or change orders are sometimes

scrutinized less than the original procurement.

• Accordingly, some bidders will “buy-in” by submitting a low bid to ensure receiving the award.

• The bidder then makes up the low bid through change orders or modifications.

27

Collusion• Collusion is an agreement between two or

more persons or businesses to limit competition to divide the market, set prices, or limit production.

• It can involve wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties

28

Leaking Procurement Information

• Selectively sharing information about an upcoming procurement, which may include IRD’s procurement strategy, specifications, or other proprietary information.

• If procurement information is disclosed to one entity, it must be shared with others to ensure fairness

29

Remember:• Regardless of dollar amount, IRD personnel must

ensure that all business transactions are transparent, fair, objective, and documented.

• If you have questions, seek advice before proceeding.

• Documentation and record-keeping is key!

30

Please Note:This presentation educates

all IRD personnel on the basic elements of the procurement process.

IRD has additional procurement training geared towards procurement professionals, contracts and grants specialists, finance, compliance, audit and other IRD personnel regarding IRD’s Procurement

Policy.